M2-Final-v3-wAnswers

M2-Final-v3-wAnswers - v3 Name UMID Chad Hogan Second Exam...

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1 v3 Name___________________________ UMID___________________________ Chad Hogan Winter 2010 Second Exam Economics 101 The University of Michigan NOTES: 1. For each question, a correct answer is worth 5 points, no answer is worth 1 point, and an incorrect answer is worth 0 points. 2. Given that the exam has 30 scored questions, the maximum possible score is 150. 3. Given that each question has 5 possible answers, a wild guess will earn 1 point on average, the same number of points earned by providing no answer. Guessing only gives you a better return than leaving the question unanswered if you can eliminate at least one answer (in which case a guess will earn more than 1 point on average). 4. The use of calculators, cell phones, personal digital audio players, or any other electronic devices will not be permitted during the exam. 5. Have your UMID with you at all times during the exam. 6. In order for your scantron to be correctly graded, you must fill in the version number of your exam (see the upper left corner of this page) on the scantron. 7. When you are done with the exam, you will turn in this page (with name and UMID filled in) along with your scantron. 8. Unless a question explicitly notes otherwise, assume that all supply and marginal cost curves slope upward and that all demand and marginal value curves slope downward.
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2 Suppose the country known as the “Others” is considering the market for volleyballs below. The “Others” are trying to determine whether or not to open their market to trade in volleyballs. Use the graph below for the next three questions. 1. ____ The “Others” decide to trade freely with the rest of the world. If you observe that they export 4000 volleyballs then you can conclude that the price on the world market must be: (a) $3 (b) $4 (c) $5 (d) $6 (e) $7
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3 2. ____ Over time, the world price rises to $8/volleyball. The “Others” respond by imposing a $2/volleyball tax on exports. The shaded area below represents a deadweight loss from the tax that emerges because: (a) volleyballs are consumed domestically that would have been more valuable if exported. (b) too few volleyballs are consumed domestically. (c) too few volleyballs are produced domestically. (d) volleyballs are exported that would have been more valuable if consumed domestically. (e) volleyballs are produced domestically that would have been cheaper to import.
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4 3. ____ While the world price remains at $8 per volleyball, the “Others” choose to raise their export tax to $7. Which of the following statements is true? (a) The “Others” will import 8000 volleyballs because the domestic price falls to $1 and the people of the “Others” will consume more volleyballs then are produced locally. (b) The “Others” will export 8000 volleyballs because the domestic price falls to
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M2-Final-v3-wAnswers - v3 Name UMID Chad Hogan Second Exam...

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